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Glossary

A contract of sale on a deferred payment basis within an agreed payment period.

Baī Dayn بيع الدين

It refers to the buying and selling of debt instruments e.g. certificates, securities, trade documents and papers in the secondary market that conform to the Shariah requirements. All these documents are essentially issued by the debtors to the creditors as evidence of indebtedness. Only documents evidencing real debts i.e. debts arising from “bona fide” business transactions may be traded.

Baī Īnah بيع العينة

A financing facility involving two separate sale and purchase contracts on a same asset and it can be in the following two arrangements:

A financier sells an asset to a customer on deferred payment terms. Immediately thereafter, the financier repurchases the same asset from the customer on cash terms at a price lower than that of the deferred payment sale.

A financier buys an asset from a customer on cash terms. Immediately thereafter, the financier sells back the same asset to the customer on deferred payment terms at a price higher than that of the cash sale.

Baī Istijrār بيع الإستجرار

A contract between a supplier and a buyer whereby the supplier supplies a particular item on an ongoing basis on an agreed mode of payment until they terminate the contract.

Baī Istisnā’ بيع الإستصناع

A purchase order contract whereby a buyer orders a seller to manufacture an asset according to specifications in the purchase contract to be delivered on a certain future date. The settlement of the purchase price is according to an agreed terms and conditions between the two parties.

Baī Murābahah بيع المرابحة

A contract of sale based on cost plus where the acquisition cost and the seller’s profit margin are disclosed to the buyer at the time of the contract. The settlement of the price is normally made on deferred payment terms.

Baī Muzāyadah بيع المزايدة

A sale of an asset in public through the process of bidding among potential buyers and the asset is sold to the highest bidder. This is commonly known as auction sale.

Baī Salām بيع السلم

A contract in which a full payment of the price is paid in advance at the time of contract for assets to be delivered later at a future date. It is necessary that the quality of the assets intended to be purchased is fully specified leaving no ambiguity leading to dispute.

Bai Urbūn بيع العربون

A sale agreement in which a security deposit is paid in advance as part payment towards the price of the asset if the contract continues to its conclusion. The deposit is forfeited if the buyer does not meet his obligation to complete the purchase of the asset. The forfeited money is considered as hibah (هبة/ gift) to the seller.

Baī Wafā’ بيع الوفاء

A contract with a condition that when the seller pays back the price of the sold asset, the buyer returns the asset to the seller. It is a bai' (sale) in form but a pledge (رهن/ rahn) in substance.